Remote Salaries: Understanding the Compensation Divide
2 min read

Remote Salaries: Understanding the Compensation Divide

Every business has its own way of compensating remote employees. However, it all comes down to two compensation strategies: location-indexed salaries and equally paid salaries.
Person working remotely
Photo by Helena Lopes on Unsplash

"How do Remote Salaries work?

Some companies pay high wages, but others cut salary for employees in low-cost countries."

After having hired and managed hundreds of engineers in my remote teams, this is what I know about remote salaries.

As more teams go remote, CTOs and HR teams have a decision to make:

  • How much should they pay to each remote employee?

Two schools of thought have emerged:

Salaries Indexed on Location

Eg: An engineer in India earns a *lower* salary than the same engineer in the US.

Benefits

  1. Lower cost - Paying less to most of the company's employees saves money
  2. Competitive in expensive cities - That money is usually invested in attracting top talent even in expensive cities

Drawbacks

  1. Creates team tension - Employees don't usually feel "ok" by earning half the salary of a colleague in the same role
  2. Hard to retain employees in low-cost regions - Their lower salary means they can leave if offered better terms

Equal Salary for the Same Role Regardless of Location

Eg: Engineers at the same level in India and US earn the *same* salary.

Benefits

  1. Equality & fairness - Equal roles get an equal salary, and no one feels they are paid less than an equivalent colleague
  2. Hire the best talent in low-cost regions - A low salary in the US is a huge salary in India, and get's the best talent there.

Drawbacks

  1. Higher cost - Paying the same to everyone tends to be more expensive
  2. Not competitive in high-cost regions - A high salary in India is likely still not be attractive for US-based Engineers

My preference is equal salaries for similar roles:

  • Easier to set up and manage in a Startup context
  • I like the sense of fairness and being transparent about salaries
  • If I have a tight budget, I’m constrained to hire mostly in lower-cost countries, and I’m ok with that.

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